Christiana's AP Macroeconomics Blog

Absolute Advantage *Who can produce more with the same resources *Who can produce most output with less resources *Example: Production of 100 vs. 20 -Papa Johns has an absolute advantage over pizza that McDonald's Comparative Advantage *Who can produce with the lowest opportunity cost Productivity Output problem: what they give up vs. what they produce Output   Examples: -Ton/Acre -Miles/Gallon -Word/Minute -Apples/Tree -Computers Produced/Hour Input problem: input that is dedicated to the chosen item/ input dedicated to the forgone item Input Examples: -# of Hours to do a job -# of Gallons of Paint to Paint a house -# of Acres to feed a horse  

-Measures of money inflows and outflows between the U.S and the rest of the world          Inflows are known as credits           Outflows are known as debits -Divided into 3 accounts           Current Account           Financial (capital) Account          Official Reserves Current Account - balance of trade or Xn (Exports-Imports)        Export (credit/asset)        Import (debit/liability) - Net Foreign Income (Net Investment)        income earned by U.S owned-foreign assets        income paid to foreign-held U.S assets - Net Transfers (Foreign Aid )        Humanitarian efforts Capital/Financial Accoun...

Key-Terms: Stagflation-  high inflation and high unemployment at the same time Deflation- a fall in the average level of prices in an economy Disinflation- reduction in inflation from year to year and can be seen in LRPC Inflation-  rise in the general level of prices in an economy (Zimbabwe) NRU = frictional, structural, and season unemployment Misery Index= combination of inflation and unemployment in any given year (single digit misery if good) Hyperinflation- where there is an unusually high rate of inflation which can cause the currency to lose value (Zimbabwe) Supply Side Economics(Reaganomics) *changes in AS and not AD determines the level of inflation, unemployment rates, and economic growth *trickle down effect : rich receive benefit before poor economic growth is created by lowering taxes and decreasing regulation lower tax rates provide positive work incentives and thus shifts the AS curve to the right Laffer Curve  -depicts a theor...

Foreign Exchange - buying and selling of currency Appreciation: strong dollar             (dollar buys more of another currency and results in less expensive imports and more             expensive exports)             leads to trade deficits             Import will increase b/c they are cheaper Depreciation : weak dollar -dollar buys less of another country -results in ,more expensive imports and less expensive exports -leads to trade surplus *currency is rather weak